Land value keeps its price better than gold as investors buy

The price of farmland rose faster than London property hotspots and gold last year, according to the latest price survey.

Anybody with 1,000 acres of prime arable land is sitting on a gold mine, it seems, with investors such as billionaire Sir James Dyson putting their money into country piles.

Investors from abroad are said to be queuing up to follow in the footsteps of the Wiltshire entrepreneur, who has reportedly shelled out more than £150 million on more than 17,000 acres of farmland in Lincolnshire.

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And it is fuelling a boom in prime agricultural land which has seen prices soar in value by 210 per cent in the past ten years.

Last year the average price of English farmland rose by 11 per cent to a record £6,882 an acre, according to the latest Knight Frank Farmland Index, which predicts an average rise of six per cent this year. However, large blocks of investment-grade arable land in the West Country are changing hands for up to £10,500 an acre, and even £11,000 in Herefordshire and Eastern England, says the report.

Land outperformed residential property in prime central London locations and matched the sudden rise in the value of the FTSE 100, which is starting to recover. It outshone gold, which lost almost 30 per cent of its value last year.

Over the past ten years gold prices rose by 212 per cent, land 200 per cent and the FTSE 100 51 per cent.

But shortage of suitable land and increased demand from farmers, lifestyle buyers and investors is pushing up the price of some green fields to an all time high. Wealthy individuals and funds are said to be attracted by steady and reliable capital growth in the price of land and are prepared to pay over the odds for large parcels in the right location.

But they are finding it harder to find what they want and last year only around 150,000 acres of land were advertised on the open market, half the amount for sale at the turn of the decade.

The large blocks of investment-grade arable land that do come to the market, either publicly or privately, are changing hands for significantly higher sums than the average reported by the index, according to Tom Raynham, head of Knight Frank's new Agricultural Investment Acquisitions department. He said: "Serious investors are increasingly prepared to do off-market deals to secure the right investments."

James Prewett, head of regional farm sales said: "Just before Christmas somebody tendered over £9,200 per acre for a block of land I am selling in the East Midlands, while in the West of the country a parcel of around 150 acres made £9,000 per acre under a five-year £250 per acre sale and leaseback arrangement. Farmers, adjoining landowners and institutional investors were among the bidders for the two blocks.

"It shows the depth of the market for the right land. The fact that a farmer buyer was prepared to accept a sale-and-leaseback arrangement also highlights how keen people are to get their hands on land when it becomes available."

Andrew Shirley, who compiled the report, said land in the South West was more likely to be snapped up by existing farmers than oligarchs.

"The South West has seen increased land values but you don't tend to get so many investment buyers from overseas because the large blocks of arable land they are looking for are not generally available. They want at least 1,000 acres in one big block, which you are more likely to find in East Anglia or Lincolnshire. But the climate means you can grow high value crops early in the South West and there is a limited supply of quality farming land."

He said claims that the planning laws are being relaxed have nothing to do with the rise in land values.

James Prewett, head of Knight Frank's regional farms team, says an interesting trend that is starting to emerge is the number of dairy farms that are being sold and kept as milk-producing units.

"It's not something I have seen for quite a while," says James.

Milk prices have risen recently, but input and feed costs are still an issue meaning those farms with plenty of good grass and lower overheads are most in demand, he said.

The report says up and coming issues for landowners include the price of grain, green subsidies and the rush to obtain village green status.

But the reports says new planning rules will make it easier for landowners to turn outbuildings into homes.